The transition of NFT from short-term speculation to long-term utility: loyalty, membership and ticketing

Author: Cam Thompson

Compilation of the original text: Deep Tide TechFlow

As the crypto market faces new challenges and market declines, many are looking for other signs of how the future of decentralization and blockchain technology may hold.

Non-Fungible Tokens (NFTs), especially Personal Profile Picture (PFP) collectibles, will see a surge in sales in 2021. Many have chosen these colorful JPEGs as a reflection of their digital identities, and building Web3, or the next iteration of the community internet, is taking shape.

But as NFT trading has slowed, the focus of the discussion has shifted from short-term value and chasing the hype cycle to the long-term utility of holding these tokens.

Many brands have already started exploring creative use cases for NFTs and how these digital tokens can be leveraged for more than just quick investment opportunities. Now, businesses are looking at NFTs as a way to build closer relationships between brands, creators, and consumers by tying rewards to long-term ownership.

For example, GQ released an NFT-related magazine subscription service in February, while sports media Sports Illustrated launched an NFT ticket program in May. Meanwhile, Starbucks launched a beta version of its Odyssey Web3 loyalty program in October to reward its most loyal coffee drinkers for digital engagement.

These popular mainstream brands are most concerned with attracting new customers looking for a richer brand experience without compromising integrity or creating complicated onboarding procedures. For some thought leaders, loyalty programs, memberships, and ticketing opportunities are the most obvious use cases for NFTs and offer the path forward for bringing the most new users to Web3.

Loyalty Economy Enhanced by NFTs

Loyalty programs, or points-based systems, such as Delta Air Lines' Skymiles or cosmetics retailer Sephora's Beauty Insider program, reward customers for purchasing a brand's goods and services.

According to a July 2022 survey by LendingTree, at least 80% of Americans are members of at least one loyalty program. Consumers typically want better discounts, faster access to free merchandise and exclusive deals through loyalty programs, Matt Schulz, chief credit analyst at LendingTree, said in the report.

Because of their ability to create communities around brands, NFTs have found a place in these systems, as demonstrated by well-known collectibles such as Bored Ape Yacht Club (BAYC), Moonbirds or Goblintown. They also help to reshape the incentive-driven and transactional nature of Web2 loyalty programs by incorporating digital identity and ownership – a new component of blockchain technology-enabled loyalty programs.

Tara Fung, CEO and co-founder of Web3 infrastructure company Co:Create, said NFT loyalty offers users the opportunity to connect more closely with their favorite brands. And brands are able to connect and engage their audiences more effectively.

“Because loyalty is a known concept, specifically retention marketing, it can become something more by including Web3 as part of the technology stack,” said Fung. by introducing a greater degree of ownership over one’s loyalty.”

Fung noted that when building a new blockchain loyalty program, there needs to be a careful balance between serving people already committed to Web3 (often referred to as Web3 natives) and not disappointing potential new users.

“It’s still a tradeoff,” Fung said. “But we’re trying to satisfy both needs, that of helping anyone get involved and experiencing Web3 in the first place, and making sure that Web3 native users feel like these are actually my assets, I can take it with me."

Getting started is often a pain point for companies looking to add Web3 loyalty benefits to existing goods and services. That's especially important for Blackbird, the builder of a restaurant loyalty program that offers perks to frequent customers who visit the restaurant.

Ben Leventhal, co-founder and CEO of Blackbird and predecessor reservation platform Resy, claimed that he believes NFTs are the most effective mechanism for attracting and rewarding restaurant customer brand loyalty.

Blackbird's NFT loyalty program is simple: when customers dine at a Blackbird-supported restaurant, they immediately receive an NFT that is minted into a unique backend wallet, marking their "proof of dining." Every time they go back to that restaurant, the NFT becomes a new token with more rare features.

“Overall, we’re thinking about loyalty and connection, but also making a restaurant feel magical and exciting to build long-term engagement and relationships with customers,” Leventhal said.

Blackbird and many other projects leveraging blockchain technology have taken the approach of stripping out Web3-related jargon to make it as new-user-friendly as possible. For example, some companies, including Nike and Starbucks, have chosen not to use the term NFT in their marketing materials, instead referring to their products as "digital collectibles" and "tokenized assets."

When building Blackbird, Leventhal's goal was to abstract blockchain technology and terminology from the user experience to make engagement core to its brand. “Ninety-nine percent of restaurant customers who interact with Blackbird don’t engage with Blackbird because they want to interact with a Web3 company, they engage with Blackbird because they want to interact with a restaurant,” Leventhal said.

Non-homogeneous tickets

The turmoil surrounding ticket sales for pop star Taylor Swift's Time Tour has revealed serious problems across the mainstream ticketing industry. From malfunctioning platforms to duplicate tickets to exorbitant resale prices, Swifties and other fans often face significant barriers to acquiring tickets.

Non-fungible (NFT) tickets offer a solution to some of the problems currently plaguing the events industry.

David Marcus, executive vice president of music at Ticketmaster, explained that artists can use token-based ticket sales as a way to gain more control over how tickets are distributed to fans. Metallica band Avenged Sevenfold, for example, offered NFT collectible holders of their Deathbats club exclusive tickets to their live performances through Ticketmaster.

“Any artist who mints their own NFT can try out token-based sales, which can be used to help connect token holders with the best seats, pre-show experiences, or simply get first-time tickets to an upcoming tour, He said, adding that there is also a growing trend of NFTs being used as “souvenirs to commemorate and relive live experiences.”

In order for NFT ticket sales to develop and grow, Marcus said that this capability requires "activated communities in Web3 that are still growing on a broader scale."

Avenged Sevenfold frontman Matt Sanders, also known as M. Shadows, he said that while not every type of event requires NFTs, they do give fans more options, relieving some of the pain points of buying and selling tickets.

"What we really need is to give fans a choice: They should be able to transfer or sell their tickets easily. They shouldn't need physical tickets, which are easy to lose. They shouldn't pay exorbitant fees, among other things," he said. Usually includes shipping and handling."

Alfonso Olvera, CEO of NFT ticket experience company Tokenproof, explained that NFT tickets can provide holders with several benefits, such as on-chain verified ownership, participation rewards, artist royalties for secondary resale, and even benefits for sponsoring events.

While Web3 ticket sales are still in their early stages of development, Olvera is confident about the industry's future, even though he believes there's a need to start with smaller events to gain traction before the technology hits the mainstream.

“They don’t have such a massive technology, so we’re looking at areas where we can demonstrate the benefits of proper NFT ticket sales first, and then bring it to a wider market,” Olvera said.

While the strategy of starting small may make sense, there are already some big names entering the Web3 ticket sales space. In May, sports magazine Sports Illustrated launched SI Box Office, a self-service event management and blockchain ticket sales platform that helps events create and sell NFT tickets. The platform partnered with blockchain software company ConsenSys to mint all tickets on the Ethereum sidechain Polygon.

“We know how important live events are to fans. Rather than building traditional barcode infrastructure, we chose NFT ticket sales. Not only do we believe it’s the future of live events, but because we don’t support traditional infrastructure, we have the opportunity to fully Build systems on-chain,” said David Lane, CEO of SI Ticketing.

For Lane, NFT ticket sales can be an entry point for fans to explore blockchain technology and get used to Web3 events.

He said: "This is the opportunity for consumers who, when they encounter it tomorrow, can see on-chain content, experience token-based opportunities, and whatever the cryptocurrency or Web3 community really wants to express. This is the first an entry point, the first NFT experience, to give them an understanding."

In addition, SI Box Office aims to make traditional entertainment or media brands more willing to enter Web3 and lead their audiences along the way.

Lane said: “We are waiting for a globally recognized brand to join the Web3 community and create something that everyone can actually use. We see this as our way of helping our partners, strategic suppliers, community events, artists and teams. If we can find partners, we can help bring them into the Web3 community and show all the amazing things that the on-chain experience can do for those partners.”

Web3 Membership and Community Engagement

In addition to loyalty programs, some brands are using NFTs as memberships into entire ecosystems. These ecosystems not only provide users with unique experiences or benefits, but also create pathways for communities to thrive.

Meral Arik, co-founder of Passage Protocol, a Web3 membership platform, said Web3 memberships vary in how they are structured and executed between brands and platforms, whether giving holders access to decentralized autonomous organizations (DAOs) or real-world social club. Smart contracts help drive these memberships, acting as "digital contracts" that signify one's affiliation to an ecosystem.

“When consumers own a membership NFT, they can feel like they own part of the brand, community, or ecosystem represented by that NFT,” said Arik. “Consequently, consumers are more emotionally and/or financially Momentum creates value for that ecosystem, whether it’s buying more products, engaging on social media, or telling friends.”

Arik said that tokenized memberships can also reward members for long-term participation in the ecosystem. She noted that Passage Protocol builds dynamic NFTs that evolve as holders interact with brands.

More importantly, she said membership NFTs could be used to enhance the already existing loyalty infrastructure without scaring away mainstream users with technical jargon.

“If executed properly, membership NFTs can be a powerful tool or component of a modern membership program without being the marketing focus of the program,” she said.

Web3 beauty company KIKI World built its brand around a growing community of makeup enthusiasts looking to better connect with the makers of their favorite products and help them along the way.

KIKI World leveraged the technology stack built by Co:Create to launch the KIKI World Membership Pass, an NFT that grants holders access to the DAO. In The DAO, members can propose product ideas, vote on upcoming product launches, and participate in exclusive events and experiences.

Brendon Garner, co-founder and chief marketing officer of KIKI World, said membership programs could use blockchain technology to enhance user experience and create more enjoyable interactions.

“Traditional loyalty and membership programs usually work like, ‘You get an email discount code the day before the public sale,’ or ‘You have some points to use at Sephora,’” Garner said, “but this is really an exciting one. Loved the experience?” He said, “We are committed to using language that everyone knows and creating a tangible impact from the very beginning by rewarding anyone who joins as a KIKI World member.”

Although the NFT is the vehicle to drive the KIKI WORLD membership program, the DAO component of their strategy helps foster a more interactive community structure - similar to a real-life membership program, but with the added benefit of blockchain technology and security.

"From a conceptual level and a philosophical level, I think it's important to be able to reward those who make the biggest contributions and empower them to actually have an impact on areas they're passionate about," Garner said.

Bringing Brands to Fans via Web3

Going forward, tools like NFT loyalty programs, membership rewards, or tokenized tickets provide a powerful framework for brands and consumers to gradually adapt to Web3. Using NFTs, brands can build communities around their products and connect and reward their most engaged and loyal fans for the long term.

Brands can leverage these tools smartly without losing new users to chasing short-term trends. The point is to find the right way to fit the technology, not to follow trends blindly. Furthermore, NFTs do not need to be marketed as the focus of branding campaigns or Web3 strategies, but rather can be used as a tool to enhance existing projects and engage mainstream users in a meaningful and sustainable way.